Custom, Excise & Service Tax Tribunal
Ce & Cgst Greater Noida, Gautam Buddh ... vs Elentec India Pvt Ltd on 31 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.70443 of 2017
With
Excise Cross Application No.70536 of 2018
(Arising out of Order-in-Original No.09/2017-CE dated 28/02/2017 passed by
Additional Director General (Adjudication) Central Excise, New Delhi)
Commissioner of Central Excise, Noida-II .....Appellant
(Formula-I Hotel, Wegmans Business Park, Plot No.3,
KP-III, Noida)
VERSUS
M/s Elentec India Pvt. Ltd., ....Respondent
(571/1&2, Ecotech-I&2, Ecotech-I, Extn.I, Greater Noida) WITH Excise Appeal No.70467 of 2017 With Excise Cross Application No.70535 of 2018 (Arising out of Order-in-Original No.08/2017-CE dated 28/02/2017 passed by Additional Director General (Adjudication) Central Excise, New Delhi) Commissioner of Central Excise, Noida-I .....Appellant (C-56/42, Renu Tower, Sector-62, Noida-201307) VERSUS M/s Elentec India Pvt. Ltd., ....Respondent (B-37, Sector-80, Phase-II, Noida-201305) AND Customs Appeal No.70664 of 2017 (Arising out of Order-in-Original No.02/Pr.Comm./Noida-I/2017-18 dated 18/05/2017 passed by Commissioner of Customs, Central Excise & Service Tax, Noida) M/s Elentec India Pvt. Ltd., .....Appellant (B-37, Sector-80, Phase-II, Noida-201305) VERSUS Commissioner of Central Excise, Noida-I ....Respondent (C-56/42, Renu Tower, Sector-62, Noida-201307) APPEARANCE:
Shri Santosh Kumar, Authorised Representative for the Revenue Shri Pramod Kumar Rai, Advocate & Shri Jayant Kumar, Advocate for the Assessee Excise Appeal Nos.70443, 70467 &
2 70664 of 2017 CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.70050-70052/2025 DATE OF HEARING : 27 August, 2024 DATE OF PRONOUNCEMENT : 31 January, 2025 SANJIV SRIVASTAVA:
These appeals filed by the revenue are directed against the Order-in-Original as detailed in the table below of the Additional Director General DGCEI in capacity of Adjudicating Authority. By the impugned order demand made against the appellant have been dropped.
Appeal No Order in Date Period Amount Address
Original Involved Rs
1 2 3 4 5 6
E/70467/2017 08/2017- 28.02.2017 16.03.2015 50,62,64,739/- B-37
CE to 31.12.20 Sector 80
15 Phase II
NOIDA
E/70443/2017 09/2017- 28.02.2017 16.03.2015 36,39,72,762/- 57 I/1&2,
CE to 31.12.20 Ecotech -
15 I, Extn -I
Greater
Noida
1.2 The respondents in these appeal are two units of M/s
Elentec India Pvt. Ltd., having their registered office at B-8/14, 1st Floor Vasant Vihar, New Delhi operating from the two different premises as per the address in column 6.
1.3 One appeal has been filed by the Respondent as detailed below:
C/70664/20 02/Pr. 18.05.20 01.01.20 8,05,65,8 B-37 17 Comm/Noida/20 17 16 to 53 Secto 17-18 29.02.20 r 80 16 Phase II NOID A By the impugned order the demand has been confirmed so respondent (party) filed the appeal.
Excise Appeal Nos.70443, 70467 &
3 70664 of 2017 2.1 Respondents, are 100% export oriented unit (100% EOU) engaged in the manufacture of battery chargers and parts/ components of mobile phone falling under tariff items 8504 40 30 and 8517 70 90 respectively of the First Schedule to the Central Excise Tariff Act, 1985.
2.2 Acting on intelligence received in Directorate General of Central Excise Intelligence to effect that. respondents were not paying Customs duty and Central Excise duty foregone on the raw materials/ inputs (imported as well as procured indigenously), utilized in the manufacture their finished goods, i.e., battery chargers and parts/components of mobile phone, cleared in the domestic tariff area (DTA) at nil rate of Central Excise duty w.e.f. 16.03.2015 in contravention of Notification No. 52/2003-Cus dated 31.03.2003 (as amended) and Notification No. 22/2003-CE dated 31.03.2003 (as amended), investigations were undertaken.
2.3 In view of the above provisions contained in the said Notification, a 100% EOU was required to pay an amount equivalent to the Customs duty and Central Excise duty foregone on raw materials/ inputs utilized in the manufacture of finished goods cleared in DTA, at nil rates of basic Customs duty and CVD.
2.4 From the statement of Sh Shabbir Ahmed, Deputy Manager and on scrutiny of documents submitted by the respondents during investigation, it was revealed observed that respondent were importing raw materials/inputs without payment of Customs duty as per Notification No. 52/2003-Cus dated 31.03.2003, as amended and also procuring raw materials/inputs-indigenously, without payment of Central Excise duty under Notification No. 22/2003-CE dated 31.03.2003, as amended, which were used in the manufacture of their finished goods Excise Appeal Nos.70443, 70467 & 4 70664 of 2017 filed B-17 Bond (with surety/security) for procurement of raw materials without payment of duty with the jurisdictional Deputy/Assistant Commissioner. Clearing parts of mobile phone, during 10.03.2015 to 31.12.2015 to other EOU (deemed export), for Physical Export and in DTA at nil rate of basic Customs duty and CVD. Further, one-to-one correlation of raw materials/ inputs with the aforesaid three categories of clearances, was not ascertainable cleared their finished goods (battery chargers and parts/components of mobile phone) to M/s Samsung, a DTA unit during the period 16.03.2015 to 31.12.2015, at nil rates of basic Customs duty and CVD, under Sl. No. 407A and 431 of Notification No. 12/2012-Cus dated 17.03.2012, as amended, they were required to pay an amount equal to the duty foregone on raw materials and inputs used in the manufacture of such finished goods cleared in DTA at nil rates of basic Customs duty and CVD. However, they were not complying with the conditions of Notification No. 52/2003-Cus. dated 31.03.2003 and Notification No. 22/2003-CE dated 31.03.2003 and did not pay an amount equal to the duty forgone on such raw materials/ inputs, during the period 16.03.2015 to 31.12.20 15 2.5 In terms of general exemption notification No. 12/2012-CE dtd 17.03.2012 and 12/2012-Cus. dated 17.,03.2012, the exemption from duty is available to the sub-parts of the parts, components and accessories of tablet computers, mobile handsets including cellular phones.
2.6 The amount of Central Excise duty foregone by Respondent No 1, under Notification No. 22/2003- CE dated 31.03. 2003, on the indigenous procurements comes to Rs. 93,18,949/- and the amount of Customs duty foregone under Notification No. 52/2003-Cus dated 31.03.2003, on the imported raw materials/ inputs comes to Rs. 35,46,53,813/-.
Excise Appeal Nos.70443, 70467 & 5 70664 of 2017 Thus resulting in nonpayment of total Customs duty and CVD, during disputed period of Rs 36,39,72,762/-.
2.7 A show cause notice dated 04.04.2016 was issued to respondent 1 asking him to show cause as to why
(i) Customs duty & Central Excise duty (inclusive of Education Cess and Secondary & Higher Education Cess) amounting to Rs. 36,39,72,762/- (Rs. Thirty Six Crore Thirty Nine Lakh Seventy Two Thousand Seven Hundred and Sixty Two only), as detailed in paras 6 and 7 above, should not be demanded and recovered from them under Section 28(4) of the Customs Act, 1962 and Section 11A(4) of the Central Excise Act, 1944;
(ii) Interest at the appropriate rate payable on the said amount of Customs duty and Central Excise duty not paid by them, should not be demanded and recovered from them under Section 28AA of the Customs Act, 1962 and Section 11AA of Central Excise Act, 1944; and
(iii) Penalty in terms of Section 114A of the Customs Act, 1962 and Section 11AC(1) (c) of the Central Excise Act, 1944 should not be imposed on them for their acts and omissions, as discussed at para 8 above.
2.8 Similarly the amount of Central Excise duty foregone by Respondent No 2, under Notification No. 22/2003- CE dated 31.03. 2003, on the indigenous procurements comes to Rs. 42,03,519/- and the amount of Customs duty foregone under Notification No. 52/2003-Cus dated 31.03.2003, on the imported raw materials/ inputs comes 10 Rs. 50,20,61,220/-. Thus resulting in nonpayment of total Customs duty and CVD, during disputed period of Rs 50,62,64,739.
2.9 A show cause notice dated 04.04.2016 was issued to respondent 2 asking him to show cause as to why
(i) Customs duty & Central Excise duty (inclusive of Education Cess and Secondary & Higher Education Cess) Excise Appeal Nos.70443, 70467 & 6 70664 of 2017 amounting to Rs. 50,62,64,739/- (Rs. Fifty Crore Sixty Two Lakh Sixty Four Thousand Seven Hundred Thirty Nine only), as detailed in paras 7 and 8 above, should not be demanded and recovered from them under Section 28(4) of the Customs Act, 1962 and Section 11A(4) of the Central Excise Act, 1944;
(ii) Interest at the appropriate rate payable on the said amount of Customs duty and Central Excise duty not paid by them, should not be demanded and recovered from them under Section 28AA of the Customs Act, 1962 and Section 11AA of Central Excise Act, 1944; and
(iii) Penalty in terms of Section 114A of the Customs Act, 1962 and Section 11AC(1) (c) of the Central Excise Act, 1944, should not be imposed on them for their acts and omissions, as discussed in para 8 above 2.10 Both these show cause notices were adjudicated by the Additional director General as per the impugned orders referred in para 1 above, dropping the demands made in the show cause notice.
2.11 Aggrieved revenue has filed these appeals stating the following ground:
Respondents admitted that they have procured raw materials under the notification no. 52/2003-Cus dated 31,03.2003 or notification no. 22/2003 dated 21.03.2003 On the basis Notification no. 12/2012-Cus dated 17.03.2012 and notification no. 22/2003-CE dated 3103.2003 contend that "raw material, parts/sub-parts, components arc one and same thing". This is not correct as these terms have been differentiated in these notifications itself. Few examples from notification no.
12/2012-Cus dated 17.03.2012 are Entry No 357, 362, 460, 469, 407A and 431.
it is apparent that notification no. 12/2012-Cus dated 17,03.2012 itself treated raw materials, parts, sub-parts, consumable components and accessories separately. Each Excise Appeal Nos.70443, 70467 & 7 70664 of 2017 entry also specifies the intention of the notification to provide extent of exemption in each case to parts/sub parts/components/ accessories/ raw material / consumable separately in different contexts. Entry no. 407A or 431 have no mention of raw material or consumable, thus it is evident that raw material and consumable have been kept out of the ambit of exemption under these entries of notification no. 12/2012-Cus dated 17.03.2012 The items procured by respondent Polycarbonate Resin, T A Wire, DC Cable, Solder Wire, 'Tape, Cable Tie etc, cannot be termed as parts/sub-parts of Cellular Phones or Battery Chargers, rather these are general raw materials in nature. The party's contention that they had imported parts and sub-parts of mobile phone is not tenable.
During the investigation, the respondents were asked to quantify the Customs and Central Excise duty foregone on input/raw materials used in the manufacture of goods cleared into DTA at NIL rate of duty. The party stated that duty foregone has been arrived at on proportionate basis as it was not possible for them to establish onc-lo-one correlation between the raw material and the type of clearances, Had they been importing or indigenously procuring sub-parts, they would have been in a position to establish one-to-one correlation between the same and their type of clearances, which proves that they have imported/procured raw materials/inputs/ consumables and not parts/components.
Reliance is placed on following decisions which make distinction between the raw material and parts/ components:
o Nicco Corporation Ltd. [2006 (2030 E.L.T. 362 (S.C.)] o Paul Lazar Vs State of Kerala [1977 40 STC 437 Ker] Excise Appeal Nos.70443, 70467 &
8 70664 of 2017 o Hydranautics Membrane (lndia) Ltd [1994 (70) E.LT.
711 (Tribunal))], o Metal Box India Ltd. [2000 (117) E.LT. 271 (Tribunal)] Extension of benefit of exemption Notification No. 12/2012-Cus dated 17-03- the 2012 and Notification No. 12/2012-CE dated 17-03-2012 to EOUs which arc otherwise available to the DTA units, provided that the items procured fall under the ambit of the said notifications. The fact is that respondent has not procured any of their items by import or indigenous procurement covered under the above said notifications before initiation of investigation (July, 2015) or after the initiation of investigation, since they themselves were aware that they were not eligible for exemption provided by these notifications.
they imported such items under Notification No. 52/2003- Cus dated 31-03-2003 and procured indigenously under Notification No. 22/2003-CE dated 31-03-2003, without payment of duty. Thus, the contention that they could have made their imports of raw materials under general exemption notifications is an afterthought and misleading. The facts remain that their procurement/import was under
the notifications available only to 100% EOUs, Since they had used raw materials/inputs imported or procured indigenously without payment of duty under Notification No. 52/2003-Cus dated 31-03-2003 and 22/2003-CE dated 31-03-2003, for the manufacture of finished goods, i.e., parts and components of mobile phones and battery chargers cleared in DTA at Nil rate of duty, they were required to comply with the conditions of the notifications which they have availed while procuring raw materials/inputs and were required to pay an amount equal to the duty foregone on inputs/raw materials procured without payment of duty Excise Appeal Nos.70443, 70467 & 9 70664 of 2017 instructions issued vide F. No. DGEP/EOU/450/2006 dated 09- 02- 2007 of the Directorate General of Export Promotion arc not applicable, to the facts of this case as the respondent has never been denied duty free import of parts/s sub part and component duty free procurement of the or same indigenously or duty free clearances under notification 12/2012-Cus dated 17-03-2012 and 12/2012-
CE dated 17-03-2012 It is incorrect to say that impugned notice had proposed to deny the level playing field between the units under DTA and EOUs. On the contrary, the facts that DTA units are at a disadvantage in comparison to Repondents. The Adjudicating Authority has failed to appreciate that the impugned notice was issued just to effectuate the statutory amendments specifically incorporated to remove the anomaly of level playing field between EOUs and DTA. This position has been clarified vide para 8 of the CBEC Circular No 54/2004-Cus dated 13-10-2004 reproduced as under:
SCN only requires the compliance of the provisions of the notifications which are available to EOUs and availed by Respondents. In the SCN, no allegation has been made for non-fulfilment of NPE The SCN does not challenge the clarification given by the said Board's Circular. The challenge in the SCN is that these notifications do not cover the party's procurements /imports.
The question of substantially satisfying the conditions as stipulated under Notification No. 12/2012-Cus and 12/2012-CE, both dated 17.03.2012 does not arise as the party is not eligible for benefits provided by the said notifications, Moreover the party had never opted for the said notifications even after initiation of the investigation In the facts and circumstances of the case, Respondent's procurement/ import of raw material/ inputs could not be Excise Appeal Nos.70443, 70467 & 10 70664 of 2017 covered under these general Notifications No. 12/2012-Cus dated 17-03-2012 and 12/2012-CE dated 17-03-2012.
The issue framed is whether the impugned goods, i.e. the material procured by Respondents are covered under the definition of parts, components or accessories. Perusal of various judicial pronouncements shows that these expression are not synonymous or inter-changeable with the expression raw material'. Judgments relied in the impugned order as follows are distinguishable o Saraswati Sugar Mills [2011 (270) ELT 465 SC] o Jindal Strips Limited [1997 (94) ELT 234 (T-LB)] o Mr Krishnaswami Naidu and others [(1971) 3 SCC 831] o Khoday Distillcrics (Pvt.) Lld. 1991 (82) STC 251 (Kar)] o Meridian Industries Ltd. [2015 (325) ELT 417 (SC)] o Vanasthali Textiles Industrics Ltd. [2007 (218) ELT 3 (SC)] The following judicial pronouncements are relevant to the present case o Nicco Corporation Lld. [2006 (203) E.L.T.362 (S.C.)| o Paul Lazar [1977(40) STC 437 (Kerala HC)] o Rai Agro Industrics Lld. [2006 (206) ELT 123 (Del)], SLP (Civil) No 15926 of 2006 was dismissed by the Hon'ble Supreme Court [2007 (207)ELT A135 (SC)| o Mediwell Hospital and Health Care Pvt. Ltd. [1997 (89) E.L.T. 425 (S.C.)] The part, sub-part, component as mentioned in notification No. 12/2012- Cus do not fall under the definition of raw material which they have actually imported/procured Excise Appeal Nos.70443, 70467 & 11 70664 of 2017 indigenously. What respondents has imported is raw material and consumable from which they manufactured parts sub-parts, components and accessories of mobile phones/ battery chargers which are their finished products cleared under Notification No. 12/2012-Cus dated 17-03- 2012.
However, merely by identification of an item in the finished product, the same cannot be defined as part/component of the finished goods, as any inputs such as raw material, consumable, parts, sub-parts, components will be constituent of the finished products. But the question whether the material procured falls under the expression raw material' or parts/components' remain unanswered. 1.30 The averments made by the adjudicating authority are denied, as -
As it is argued that if the material procured by respondents do not fall under the above-said notification, justification of dropping the demand docs not sustain The demand of duty is justified as the materials have been procured under Notification No. 52/2003-Cus and 22/2003-CE both dated 31-03-2003 and as per provisions of these notifications the amount equal to the duty foregone is to be paid, when the finished goods were cleared at nil rate of duty to a DTA unit.
2.12 Respondents have filed cross objections in the matter.
2.13 Similarly the amount of Central Excise duty foregone by party (Respondent No 1), under Notification No. 22/2003- CE dated 31.03. 2003, on the indigenous procurements comes to Rs. 6,87,696/- and the amount of Customs duty foregone under Notification No. 52/2003-Cus dated 31.03.2003, on the imported raw materials/ inputs comes to Rs. 7,98,78,157/-. Thus resulting in nonpayment of total Customs duty and CVD, during disputed period (01.01.2016 to 29.02.2016) of Rs 8,05,65,853/-.
Excise Appeal Nos.70443, 70467 & 12 70664 of 2017 2.9 A show cause notice dated 30.01.2017 was issued to party Respondent 1) asking him to show cause as to why
(i) Customs duty & Central Excise duty (inclusive of Education Cess and Secondary & Higher Education Cess) amounting to Rs. 8,05,65,853/- (Rs. Eight Crore Five Lakh Sixty Five Thousand Eight Hundred fifty three only), should not be demanded and recovered from them under Section 28(4) of the Customs Act, 1962 and Section 11A(4) of the Central Excise Act, 1944;
(ii) Interest at the appropriate rate payable on the said amount of Customs duty and Central Excise duty not paid by them, should not be demanded and recovered from them under Section 28AA of the Customs Act, 1962 and Section 11AA of Central Excise Act, 1944; and
(iii) Penalty in terms of Section 114A of the Customs Act, 1962 and Section 11AC(1) (c) of the Central Excise Act, 1944, should not be imposed on them for their acts and omissions, as discussed in para 8 above 2.14 The show cause notice was adjudicated as per the order in original referred in para 1.2 above holding as follows:
"ORDER
(i) I confirm the demand of Customs duty & Central Excise duty amounting to Rs. 8,05,65,853/- (Rs. Eight Crore Five Lakh Sixty Five Thousand Eight Hundred Fifty Three only) and order its recovery from M/s. Elentec India Pvt. Ltd., B-
37, Sector-80, Phase-II, Noida, Gautam Budh Nagar, U.P. under the provisions of Section 28(8) of the Customs Act, 1962 and Section 11A(10) of the Central Excise Act, 1944;
(ii) I also confirm the demand of interest on the above amount of Customs duty & Central Excise duty, at the appropriate rate, and order its recovery from them under the provisions of Section 28 AA of the Customs Act, 1962 and Section 11AA of the Central Excise Act, 1944; and
(iii) I also impose a penalty of Rs. 80,00,000/- (Rs. Eighty Lakh only) upon them under Section 112(b)(ii) of the Customs Excise Appeal Nos.70443, 70467 & 13 70664 of 2017 Act, 1962 and Rule 25 of the Central Excise Rules, 2002 read with Section 11AC(1)(a) of the Central Excise Act, 1944. If the duty as determined and interest payable thereon is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent. of the penalty so determined subject to the condition that such reduced penalty is also paid within the period so specified."
2.15 Aggrieved party (Respondent No 1) has filed this appeal.
3.1 We have heard Shri Santosh Kumar, Authorized Representative for the revenue and Shri Pramod Kumar Rai, Advocate for the respondents-assessee.
3.2 Authorized representative reiterated the grounds of appeal.
3.3 Counsel for the respondents support the impugned order and submits:
The case of department as per the show cause notice is perverse.
DGEP Circular dated 09.02.2007 to take care of this perversity leading to uneven playing field The interpretation adopted by revenue leads to absurd results and is contrary to principles laid down in following decisions.
o South eastern Coalfields Ltd. [2006 (200) ELT 357 (SC)] o Arcelor Mittal Nippon Steel India Ltd. [2022 (379) 418 (SC)] Benefit of exemption notification No 12/2012-CE and 12/2012-Cus would be admissible to be the party as has been held by ADG while dropping the demand, placing reliance on the following decisions:
o Star Paper Mills [1989 (43) ELT 178 (SC)] o Saraswati Sugar Mills [2011 (270) ELT 465 (SC)] Excise Appeal Nos.70443, 70467 & 14 70664 of 2017 o Khoday Distillieries (P) Ltd [1991 (82) STC 251 (Kar)] o Ferro Alloys Corpn Ltd [1997 (90) ELT 405 (T)] o Jindal Strips Ltd [1997 (94) ELT 234 (T-LB)] o Meridian Industries Ltd. [2015 (325) ELT 417 (SC)] o Vanasthali Textiles Industries Ltd. [2007 (218) ELT 3 (SC)] Alternatively the benefit of Notification No 24/2005-Cus should be admissible.
The benefit of exemption could have been claimed subsequently even if the same is not claimed at the time of importation. Reliance placed on o Indosolar Ltd. [2019 (367) ELT 679 (T-All)] o Share Medical Care [2007 (209) ELT 321 (SC)] o HCL Ltd. [2001 (130) ELT 405 (SC)] o CIPLA Ltd. [2007 (218) ELT 547 (T-Chennai)] o Indian Petro Chemicals [1997 (92) ELT 13 (SC)] In any case no penalty is imposable.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of argument.
4.2 The gist of the impugned order has been stated in the appeal memorandum as well as the review order of the Committee of Chief Commissioners. The same is reproduced below:
"3.1 The AA had carefully considered the facts of the case on record, written submissions made by the party and record of personal hearing. Various issues taken by the AA are discussed below:
3.2.1 As regards the issue whether M/s Elentec are eligible for the benefit of Not. No. 12/2012- Cus. dated 17.03.2012 and Not. No. 12/2012-C.E dated 17.03.2012 or they are required to pay an amount equal to duty foregone on raw materials/ inputs during the period from 10.03.2015 to 31.12.2015 as per the conditions of Notification No. 52/2003-Cus. dated 31.03.2003 and Notification No. Excise Appeal Nos.70443, 70467 & 15 70664 of 2017 22/2003-C.E. dated 31.03.2003, the AA found that M/s Elentec had claimed that they were eligible to avail the benefit of Notification No. 12/2012-Cus. and Notification No. 12/2012-C.E, as per C.B.E.C. instruction issued vide F. No. DGEP/EOU/450/2006 dated 09.02.2007. (Para 24 (Al) of O-
i-O refers) 3.2.2 From the clarification by the Board the AA found that the board enjoins upon an EOU to be treated at par with a DTA unit, if it substantially satisfies the requirements of the Rules to be followed as stipulated under the Notifications 21/2005-Cus dated 01.03.2005, 39/2005-Cus dated 02.05.2005 and 06/2006-CE dated 01.03.2006. It was mentioned that if the exemption on parts, components and accessories were denied to an EOU, that would put an EOU at a disadvantageous position vis-a-vis DTA manufacturer. Hence, it was clarified that exemption of customs and central excise duties on parts, components and accessories of mobile handsets including cellular phones under Notification No. 21/2005-Cus dated 01.03.2005, 39/2005- Cus dated 02.05.2005 and 06/2006-CE dated 01.03.2006 shall be applicable for EOUs, if the substantive conditions of rules required to be followed under these notifications were fulfilled by an EOU to the satisfaction of the jurisdictional Asstt./ Dy. Commissioner 3.2.3 The AA found that the effective notifications granting the exemption from Customs duty/ Central Excise duty on parts, components and accessories of mobile handsets including cellular phones are 12/2012-Cus dated 17.03,2012 and 12/2012-CE dated 17.03.2012 3.2.4 The Board clarification dated 09.02.2007 also laid down that he benefit of general Notification had to be extended to the EOU post facto despite the fact that they haven't followed the procedure laid down under Notification No. 12/2012-Cus. and Notification No, 12/2012-C.E. The AA observed that Department clarifications were binding on the Excise Appeal Nos.70443, 70467 & 16 70664 of 2017 Departmental authorities as held by the Hon'ble Supreme Court in the case of Paper Products Ltd. Vs Commissioner of Central Excise, 1999 (112) E.L.T. 765 (S.C). Accordingly, the AA held that when exemption from Customs duty/Central Excise duty was available to a DTA unit, an EOU Unit cannot be denied the same benefits, putting them at disadvantage. Hence, the AA held the noticee had substantially satisfied the conditions as stipulated under Not. No. 12/2012-Cus and 12/2012-CE, both dated 17.03.2012.
3.3.1 As regard the issue whether the goods impoted/indigenously procured could be covered under these general Exemption Notification No. 12/2012-Cus. and Notification No. 12/2012-C.E or were out of coverage of these general Notifications being consumables the AA found that the dispute was whether the impugned goods fall under the definition of parts, components or accessories r goods cleared by M/s Elentec at nil rate. The case in SCN being based on the contention that these are 'consumables' and not 'parts, components or accessories' 3.3.2 The AA had gone through various definitions of consumables, components, raw materials and others. The AA found that M/s Elentec had enclosed details and uses of various items in support of their contention that all their imports' indigenously procured goods were identifiable in the finished products manufactured by them. From the details, the AA found that some parts were used in the manufacture of charger parts/mobile parts and were identifiable in the finished goods, some were used for quality checks and some were used for manufacture of parts which were supplied to another 100% EOU.
3.3.3 From various judgments pertaining to definition of components, the AA found that some of the items which were subject matter of the SCN were either covered under Exemption Notification No. 12/2012-Cus. (Sr. No. 431) or Excise Appeal Nos.70443, 70467 & 17 70664 of 2017 under Exemption Notification No. 12/2012 -C.E (Sr. NO.
272). Three items viz. High Frequency Iron Machine, Aluminated Magnifier and Mask continued to be covered as capital goods, tool etc. under Notification No. 52/2003-Cus. and under Notification No. 22/2003-C.E., both dated 3 1.03.2003.
3.4 As regard the issue whether M/s Elentec could challenge the assessment made at the time of import indigenously procurement or the same has become final the AA found that the Board circular had clarified that benefit of Notification No. 21 /2005-Cus. dated 02.05.2005, Notification No. 39/2005-Cus. dated 02,05,2005 and Notification No. 6/2006-C.E. [presently effective Notification No. 12/2012-Cus, dated 17,03.2012 and Notification No. 12/2012-C.E dated 17.03.2012] meant for DTA units shall also be extended to the EOUs. Thus, the AA decided this issue in the favor of the Noticee.
3.5 Accordingly, the entire demand present in the impugned SCN was dropped."
4.3 Basic issue involved in the matter is whether the benefit of Notification No 12/2012-Cus (S No 431) and 12/2012-CE (S No
272) can be extended to the respondent. Adjudicating authority has dropped the demand by extending the benefit of the same. Revenue is aggrieved.
4.4 The said entries of the notifications are for sake of convenience a reproduced below:
Sl Chapter Description of Standard Additional Condition No or goods rate duty rate No Heading or sub-
heading
or tariff
item
431. Any The following Nil Nil 5
Chapter goods, namely:-
(i) parts,
components
and
accessories
for the
Excise Appeal Nos.70443, 70467 &
18 70664 of 2017
manufacture
of mobile
handsets;
(ii) sub-parts for
the
manufacture
of items
mentioned at
(i) above;
(iii) parts or
components
for the
manufacture
of battery
chargers, PC
connectivity
cables,
Memory cards
and hands-
free
headphones
of mobile
handsets;
and
(iv) Sub-parts for
the
manufacture
of items
mentioned at
(iii) above.
Explanation. - For
the purposes of
this entry, mobile
handsets include
cellular phones
5 If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
Sl Chapter or Description of excisable Rate Condition No heading or sub- goods No heading or tariff item of the First Schedule 272 85 or any other (a) Parts, components and Nil 2 Chapter accessories of mobile handsets including cellular phones.
(b) Parts, components of
battery chargers and
hands-free headphones
and PC connectivity
cable of mobile
handsets including cellular
phones;
Excise Appeal Nos.70443, 70467 &
19 70664 of 2017
(c) sub-parts of (a) and (b)
2 Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
4.4 The disputed items with their usage is as follows:
Appeal No E/70467/2017 S Description Usage No 1 Polycarbonate Resin It is in the form of granules which is melted through injection moulding to form the body of battery charger.
2 TA wire/ DC wire It is used to transfer DC output from charger to mobile phone 3 Solder bar/ solder It is used to solder components on the PCB wire 4 Tape It is used for packing the charger in the inner box so that it is stable in its place. 5 Cable Tie It is used to tie up the cable of charger. 6 Insert Jig Essential part of inserting pin in front and rear cover. Screwing is done for front & rear cover for tight interlocking 7 High Frequency iron This machine is used for manual soldering machine of PCB parts. Using this all parts can be soldered at their defined place.
8 Barcode sticker It is essential as per BIS (Bureau of Indian Standard), pasted to charger for scanning purpose.
9 Alluminated It is essential tool for visual inspection of magnifier defects in mobile phones & chargers, through these minor defects can be tracked.
10 Mask To avoid fumes inhaling into body while soldering of PCB. It is used to take care of health issues of the workers and used as per Factory Act Appeal No E/70467/2017 1 Polycarbonate Resin It is in the form of granules which is melted through injection moulding to form the body of battery charger.
2 Seiko Ink Used for printing the Samsung Logo on the back of battery cover.
3 Paint The paint, primer and thinner is used in 4 Weld Cover Primer required proportions in the process of coating on the front cover, rear cover and battery cover as per the specifications of Samsung.
5 Metal Source/ It is used to facilitate the drying of paint Tungsten Filament after coating process. It is essential component of drying machine of chapter 85. 6 Tape It is the tape used on the inside of the rear 7 Graphite Thermal battery cover for absorbing heat generated Excise Appeal Nos.70443, 70467 & 20 70664 of 2017 Sheet/ Label/ Vinyl from mobile phones while on continuous Battery Cover use and also to make it functionally good 8 Hot Runner Valve It is essential component of mould and is Pin used for housing melted resin into mould to form battery coves and front/ rear cover. 9 Plate Tool It is used for checking the flatness of battery cover, front cover and rear cover.
It is essential to check the defects in the covers so this tool is effective in checking flatness.
10 Insulated Wire It is used for making power supply harness, which has been supplied by Schneider Electric and Incap Manufacturing, Bangalore, an EOU.
11 Ferrite Cable This cable consists of a ferrite core which has been used to manufacture wiring harness, which has been supplied by Schneider Electric and Incap Manufacturing, Bangalore, an EOU 4.5 From perusal of entry at S No 431, of the custom notification, ii is evident that exemption has been granted to all parts, components, accessories and sub parts of these, for the manufacture of mobile handsets, battery chargers, PC connectivity cables, Memory cards and hands-free headphones of mobile handsets. The phrase used in the said entry is "for the manufacture of" and not "of". Thus anything which goes into the manufacture of these items would be eligible to exemption under the said entry of this notification. It is settled position in law that the exemption notification need to be construed strictly as per the words and phrase used in the notification. From the phrase used we are of the view that this phrase would cover all the items that are consumed directly or indirectly for the manufacture of these items. Similar expressions were used while defining the "Capital Goods" as per Rule 57 Q of the Central Excise Rules, 1994 and Hon'ble Supreme Court has in the case of Jawahar Mills Ltd. [2001 (132) E.L.T. 3 (S.C.)] interpreted the said phrase to be very wide to cover all things used in the factory of production to be covered by the said definition. The observations made by Hon'ble Apex Court are reproduced below:
2. Rule 57Q was introduced by Notification No. 4/94-C.E., dated 1st March, 1994. It enabled manufacturers to claim Modvat credit of duty paid on „Capital goods‟ used in their factory. The expression „Capital goods‟ has been defined in Excise Appeal Nos.70443, 70467 & 21 70664 of 2017 the Explanation to Rule 57Q. For the proper appreciation of the controversy between the parties, it would be convenient to reproduce Rule 57Q along with its Explanation. It reads as under :
"57Q Applicability. - (1) .........
Explanation. - For the purposes of this section, -
(1) ‟capital goods‟ means-
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weigh-bridges used in the factory of the manufacturer.
(1) ...... (2) ........"
3. The Tribunal by the impugned judgment and order dated 13th April, 1999, considered various items which were involved in different appeals and by a common judgment and order decided the controversy in favour of the manufacturers rejecting the stand of the revenue that those are not „Capital goods‟ within the meaning of Explanation (1)(a) defining „Capital goods‟. Some of the items considered by the Tribunal are : power cables and capacitors in case of Jawahar Mills Ltd.; control panels, cables distribution boards, switches and starters and air compressors in the case of Indian Refrigeration Co. Ltd.;
electric wires and cables in the case of Kothari Sugar and Vijay Chemicals. The Tribunal on consideration of the aforesaid provision and various decisions including some of this Court one of it being by a Bench of which one of us Excise Appeal Nos.70443, 70467 & 22 70664 of 2017 (Bharucha, J.) was a member of [Indian Farmers Fertilisers Cooperative Ltd. v. Collector of Central Excise, Ahmedabad - 1996(86) E.L.T. 177 (S.C.) = (1996) 5 S.C.C. 488] came to the conclusion that the items involved qualify as „Capital goods‟ under Rule 57Q and would thus be eligible for Modvat credit. The Tribunal did not accept the contention of the Revenue that the items were not „Capital goods‟ within the meaning of terms as defined in Explanation (1).
4. The aforesaid definition of „Capital goods‟ is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be „Capital goods‟, and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be „Capital goods‟ and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal.
5. In the case of Indian Farmers Fertiliser Cooperative Ltd. (supra) this Court interpreted the notification which conferred exemption in respect of such raw naphtha as was used in the manufacture of ammonia provided such ammonia was used elsewhere in the manufacture of fertilizers. The facts of that case were that the appellant was Excise Appeal Nos.70443, 70467 & 23 70664 of 2017 manufacturer of urea - a fertilizer and utilized for that purpose raw naphtha. The question therein was whether ammonia used in the off-site plants was also ammonia which is "used elsewhere in the manufacture of fertilizers". The off-site plants were held to be part of the process of the manufacture of urea. Relying upon the phraseology used in the exemption notification, it was held that there was no good reason why the exemption should be limited to the raw naphtha used for producing urea that is utilized directly in the urea plant since the notification only required that the ammonia should be used in the manufacture of fertilizers and not that it should be used directly in the manufacture of fertilizers. The Court said that :
"The exemption notification must be so construed as to give due weight to the liberal language it uses. The ammonia used in the water treatment, steam generation and inert gas generation plants, which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture thereof is entitled to the duty exemption."
6. The contention of learned Additional Solicitor General that the aforesaid decision and other decisions referred by the Tribunal in the impugned order were cases involving sales tax and income tax and, therefore, the Tribunal should not have relied on those decisions is without any substance because the real question is that of the principle laid down by a decision. In view of the liberal language of the provision; Mr. Rohtagi fairly and very rightly did not seriously dispute that if any of the items enumerated in explanation 1(a) is used for any purpose mentioned therein for the manufacture of final products, it would satisfy the test of „Capital goods‟. The main contention of Mr. Rohtagi, however, is that the question whether an item falls within the definition of „Capital goods‟ would depend upon the user Excise Appeal Nos.70443, 70467 & 24 70664 of 2017 it is put to. The submission is that parts of the items in respect whereof availing of Modvat credit has been allowed by the Tribunal could not be treated as „Capital goods‟ as the manufacturer could not establish that the entire item was used in the manufacture of final product. To illustrate his point, Mr. Rohtagi submitted that part of a cable may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of „Capital goods‟ within the meaning of the Rule on the ground of its user as it now sought to be urged by the learned counsel. The case of the revenue has all through been that the items in question per se are not „Capital goods‟ within the meaning of the expression as defined in Explanation 1(a). ....."
4.6 The larger bench of tribunal has in case of Jawahar Mills [1999 (108) E.L.T. 47 (T-LB)] interpreting the same phrase has observed as follows.
35. It has been contended that producing means bringing into existence a new article from raw material and processing signifies an operation for bringing about any change in any substance for the manufacture of the final product. However, we are concerned with the meaning of the expression `used for producing or processing‟. The said expression would not, to use the language of the Supreme Court in J.K. Cotton Spg. & Wvg. Mills Co. Pvt. Ltd. be limited to ingredients or commodities used in the process or Excise Appeal Nos.70443, 70467 & 25 70664 of 2017 those directly and actually needed for turning out or the creation of the goods.
4.7 The way in which the revenue has sought to interpret the expression used in the notification can be only by way of replacing the word "for" used in the notification by the word "of". We refer to explanation in this regard available on web-page "https://english.stackexchange.com/questions/ 528337/definition-of-vs- definition- for#:~:text=According%20to% 20Seth %20Lindstromberg%20in,purpose%20of%20defining%20this%2 0word)" assessed on 22.01.2025.
"According to Seth Lindstromberg in English Prepositions Explained, while "of" expresses referential possession (the word has a definition) or a verb-object relationship (the word is defined), "for" expresses purpose (I want a definition for the purpose of defining this word)."
4.8 In view of the above we find that the controversy sought to be raised in the present case as to whether these goods qualify as "component" part or accessory, etc., is totally irrelevant for determining the issue of admissibility of these notifications. The benefit of these notifications will be available in respect of all goods used for manufacture/ production of mobile parts and battery chargers.
4.9 Further we find that all the arguments advanced by the revenue to hold that these exemption will be available only in respect of identifiable components, pars, and accessories only was rejected by a larger a bench. In case of Jindal Strip Ltd [1997 (94) ELT 234 (T-LB)] following has been held:
"11. Customs Tariff Act, 1975 was brought into force with effect from 2-8-1976. At that time Government indicated that there was no intention to change the rate of duty on account of coming into force of the new Act. Accordingly several exemption notifications were promulgated, one of them being Notification No. 242/76 with the intention of retaining the 40% rate of duty for component parts. Section Excise Appeal Nos.70443, 70467 & 26 70664 of 2017 XIII of the new tariff deals with articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware. Chapter 68 covers "Articles of stone, plaster, cement, asbestos, mica or similar materials." Chapter 69 takes in "Ceramic products". Chapter Heading 69.02 took in the following :
"Refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths"
Sub-heading 6902.10 read as follows :
"Containing by weight, singly or together, more than 50% of the elements Mg, Ca or Cr, expressed as MgO, CaO or Cr2O3".
85% Sub-heading 6902.20 read as follows :
"Containing by weight more than 50% of alumina (Al2O3), of Silica (SiO2) or of a mixture or compound of these products".
85% Chapter 84 of the new tariff deals with machinery and parts thereof. Chapter Note 1(a) of Chapter 84 excluded articles of Chapter 68 from the purview of Chapter 84. Chapter Note 1(b) of Chapter 84 excluded appliances and machinery or parts thereof of ceramic material (Chapter 69) from the purview of Chapter 84. under the new tariff refractory bricks would fall under Chapter 69 (tariff rate of duty was 85%). Thus it became necessary to issue Notification No. 242/76 to maintain the rate of duty at the old level. The notification exempted refractory bricks of special shape or quality for use as component parts of industrial furnaces falling under Heading 69.02 of the First Schedule to the Customs Tariff Act, 1975, from so much of that portion of the duty of customs leviable thereon which is specified in the First Excise Appeal Nos.70443, 70467 & 27 70664 of 2017 Schedule as is in excess of 40% ad valorem. Notification No. 77/90 was issued in the same terms. This notification also exempted another item „soft ferrite‟ under Chapter Heading 69.09 from duty in excess of 55% ad valorem. The exemption in regard to auxiliary duty of customs was provided in Notification 112/87. Item 28 of the Table took in "Refractory Bricks of special shape or quality for use as component parts of industrial furnaces" of Chapter 69 of the Customs Tariff Act, 1975.
12. "Part" is defined in Black‟s Law Dictionary Sixth Edition at page 1117 as under :-
"An integral portion, something essential belonging to a larger whole; that which together with another or others makes up a whole ........ a portion, share or purpart".
In Chambers 20th Century Dictionary the meaning given for "component" is as under :-
"one of the parts or elements of which anything is made up, or into which it may be resolved".
In Oxford Dictionary the meaning of "component" is :-
"Contributing the composition of whole"
In Webster‟s Dictionary the meaning given is "A part; a constituent, an ingredient."
In our view, the common parlance meaning of the expression "component" is also the same, that is, one of the parts or elements of which anything is made up or into which it may be resolved or a constituent. The meaning in common parlance has to be looked into since the notification itself does not contain any definition of the expression.
13. Several decisions of High Courts containing reference to "part", "component" or spares have been placed before us in the course of submissions. In C.S.T. v. Amar Radio Cabinet Works - 1968 (22) STC 63 (Bom. HC) entry No. 65 Excise Appeal Nos.70443, 70467 & 28 70664 of 2017 in the Bombay Sales Tax Act referring to wireless apparatus, radiographs, loudspeakers etc. and spare parts of wireless equipments and radiographs was considered. The question was whether radio cabinets sold by a dealer would attract entry 65 or the residuary entry 22. It was held that while the word "part" has a general sense, "spare part" takes colour from the word "spare", that is a part which would require replacement in ordinary course on account of wear and tear and would not have the amplitude of the word "component". It was indicated that the owner of radio will not ordinarily keep an extra cabinet spare and, therefore, cabinet cannot be regarded as a spare part, though it is a component of radio and, therefore, entry No. 65 would not apply. In Commissioner of Sales Tax v. Pritam Singh - 1968 (22) STC 414 (All. HC) the question arose in the context of manufacture of bodies of motor vehicles. Item 24 of the exemption notification referred to motor vehicles and component parts of motor vehicles. It was held that a component part of an article is an integral part necessary for the constitution of the whole article and without it the article will not be complete and body of a motor vehicle being an integral part of the motor vehicle has to be regarded as a component part. In Sujan Singh & Another v. A.A.C. Sales Tax - 1969 (24) STC 504 (Delhi HC) the question was whether the body of motor vehicle is a spare part within the meaning of the entry "motor vehicles including chassis of motor vehicles, motor tyres and tubes and spare parts of motor vehicles" under item 1 of first schedule to the Bengal Finance (Sales Tax) Act. It was held that spare part is an extra part kept for use in emergency for replacement, that every component will not be a spare part and no owner of vehicle would keep a body of motor vehicle as spare part and, therefore, it cannot be regarded as a spare part. In Bajoria Halwasiya Service Stn. v. The State of Uttar Pradesh - 1970 (26) STC 108 (All. HC) a similar question arose under the provisions of the U.P. Sales Excise Appeal Nos.70443, 70467 & 29 70664 of 2017 Tax Act and a notification issued thereunder. It was held that body of a motor vehicle is not a spare part, though it is a component since a spare part means a part kept in readiness for use in emergency and no owner of vehicle will keep body of a vehicle in readiness for use in emergency. It was held that every component part need not be a spare part while every spare part will necessarily be a component part.
14. In Paul Lazar v. State of Kerala - 1977(40) STC 437 (Kerala HC) it was held that copper wire used in manufacture of transformers is not a component part thereof. It was indicated that component part has to be an identifiable object and copper wire used in the manufacture of transformer is not an identifiable object.
15. In Ghaziabad Engg. Co. (P) Ltd. v. Commr. of Sales Tax - 1991 (80) STC 243 (Delhi HC) under the provisions of the Bengal Finance (Sales Tax) Act, the court considered entry 1 of first schedule of Bengal Finance (Sales Tax) Act, namely, motor vehicles, including motor vehicles tyres and tubes and spare parts of motor vehicles and held that fuel injection pump, which is a part of diesel engine is a component part of the diesel engine and not a component part of the motor vehicle and, therefore, the fuel injection pump sold as a spare part would not be a spare part of motor vehicle. In Khoday Distilleries (P) Ltd v. Commr. of Commercial Taxes, Karnataka - 1991 (82) STC 251 (Karnataka HC) it was held that molasses used in the manufacture of Ethyl alcohol can be identified by chemical test and, therefore, is a component part of the end product. The Supreme Court in State of Madras v. R.M.K. Krishnaswami Naidu and Others - 1970 (26) STC page 42 has taken a similar view. In State of Tamil Nadu v. Tube Investments of India Ltd. - 1992 (85) STC 245 (Madras HC) it was held that dynamo of a cycle is not a component part but an accessory of cycle. In Televista Electronics v.
Excise Appeal Nos.70443, 70467 & 30 70664 of 2017 Commr. of Sales Tax - 1992 (87) STC 410 (Delhi HC) in considering the entry relating to wireless receiving instruments and spare parts and accessories in the schedule to the Bengal Finance (Sales Tax) Act, it was held that a spare part is always a component part but the converse may not be invariably true.
15. In Star Paper Mills Ltd. v. Collector of Central Excise - 1989 (43) E.L.T. 178 (S.C.), the Supreme Court held that paper core used for rewinding of paper in rolls is a component part within the meaning of Notification No. 201/79. The court relied on the dictionary meaning of the word "component" as "a constituent part". Since use of paper core is necessary for rewinding of paper if delivered to the customers in rolls, it should be a component part within the meaning of the Notification.
16. Notifications 246/76, 77/90 and 112/87 do not define the word "component part" with the result that one has to go by the meaning the word carries in common parlance. The dictionary meaning of "component" is "one of the parts or elements of which anything is made of or into which it may be resolved", or "a constituent part" and this meaning has been accepted by the Supreme Court in Star Paper Mills Ltd. - 1989 (43) E.L.T. 178. Much is sought to be made out of the meaning stated as "constituent part" . The suggestion is that it must be a part in the initial constitution of the manufactured product. This suggestion is merely based on a priori assumption. "Constituent", according to Chambers 20th Century Dictionary means :-
"constituting or forming; essential; elemental; component; electing; constitution-making - n. an essential or elemental part; one of those who elect a representative, esp. in parliament; an inhabitant of one‟s constituency."
Thus, "constituent" only means an essential part or component. Use of the words "component parts" or "constituent parts" is an example of tautology. "Constituent"
Excise Appeal Nos.70443, 70467 & 31 70664 of 2017 and "component" essentially mean the same thing, that is, an essential part of which anything is made of or into which it may be resolved. When parts are put together to create an end product, they are regarded as component parts. When an assembled product is dismantled, it gives rise to component parts. Whatever be the stage, that is, before assembling, after assembling and after dismantling, such essential are [integral] part is a component, when a component part is damaged or is worn out and therefore requires replacement and is replaced, the replacing part does not cease to be a component part because it was not present in the initial assembly and had been put in the place of a damaged or worn out component part. The much wider meaning given to the expression "component" in Khodey Distilleries (P) Ltd. v. Commissioner of Commercial Taxes, Karnataka and Others - 1991 (82) STC 251 (Kar. HC) and in State of Madras v. R.M.K. Krishnaswami Naidu & Ors. - 1970 (26) STC 42 (SC) does not affect this position. A spare is a replacement part, to replace a damaged or worn out component; nevertheless it is a component part.
17. "Component" is the genus and "spare" is a species that is, component which is used for replacement. If all that is available is the use of the expression "component" or "component part", the usage must be understood in its normal connotation, in the absence of any specific qualification or restriction. There are several notifications where such qualifying or restrictive words have been used to suggest that the component part must have been used in the initial assembly or in the manufacture of the final product thereby excluding "spare" from the ambit of the expression "component part". There are no such qualifying or restrictive words used in the notifications under consideration. Hence, with respect, it is not possible to agree with the view taken in some of the decisions of the Tribunal that "component" implies parts used in the initial assembly or manufacture and excludes "spares". The Excise Appeal Nos.70443, 70467 & 32 70664 of 2017 amplitude and significance of the word "component" cannot be cut down in the absence of clear words indicative of any intention to restrict its meaning and operation. The view taken in Vaz Fowarding Pvt. Ltd. - 1989 (43) E.L.T. 358 (Tribunal) was not followed in Metal Impacts Pvt. Ltd. - 1993 (64) E.L.T. 286 (Tribunal), but the distinction drawn based on the fact that the words "component parts" occur in isolation and not in conjunction with the final product is a distinction without difference. The amplitude of the words "component part" is not in any way restricted by using the words in conjunction with the article of which they are component parts.
18. We indicated that there are a large number of Notifications using appropriate language to bring out an intention to restrict the scope and amplitude of the word "component". The following table refers to the particulars :-
S Notification Language used
No. No.
82/60 Component parts of any machinery ......
required for the purpose of initial setting up of that machinery or for its assembly or manufacture 80/70 Imported as replacement for defective component parts or peripherals 117/70 Spare parts required for the purpose of manufacture 74/85 Components are imported for the purpose of providing warranty coverage or after sales service by the manufacturer to his customers 77/85 -Do-
503/86 -Do-
155/86 Parts required for the purpose of initial
setting up or assembly or manufacture
158/86 Components required for the
manufacture of goods
Excise Appeal Nos.70443, 70467 &
33 70664 of 2017
66/88 Component parts of goods covered by
Notification No. 65/88 imported into
India for the manufacture of the said
goods
269/88 Components required for the
manufacture of forklift trucks
97/89 Parts required for the manufacture of
specified goods when imported into
India by a manufacturer of such goods
106/92 Components and parts when imported
into India for repair of dredges.
In the above Notifications, wherever it was intended to restrict the amplitude and significance of the word "component", specific and appropriate language was used to bring out the intention. The Notifications contain illustration of intention to restrict the meaning of components as those to be used in assembly or manufacture or as spare. It is obvious that the word "component" includes "spare" and has very wide connotation and this position fully supports the view we have taken. Shri D.S. Negi, SDR in dealing with the above position, referred to following Notifications :-
S Notification Language used No. 1 13/81-Cus. Capital goods, Raw materials components
imported for the purpose of manufacture of articles for export out of India by 100% export oriented undertakings 2 262/81- Machinery, Raw materials, components, Cus. spare parts of machinery, consumables, packaging materials, office equipment, spares and consumables thereof, Tools, jigs, gauges, fixtures and accessaries proto types, technical and trade samples for development and diversification, Drawings, Blue prints and charts etc..... imported for the production of goods for export or for being used in connection with the production or packaging of goods for export or for the promotion of such export by units.......
3 256/87- Capital goods, raw materials, Excise Appeal Nos.70443, 70467 & 34 70664 of 2017 Cus. components, spares of production machinery, consumables etc. imported by or on behalf of the gem and jewellery units set up in ................ Export processing zone ........... for manufacture of jewellery for export by ..........
4 260/87- -Ditto-
Cus 5 3/88-Cus. -Ditto-
6 277/90 -Ditto-
He points out that these notifications refer to components as well as spare parts and indicated that they refer to different articles, namely, parts used for first assembly or manufacture on the one hand and spares used for replacement. Notification No. 13/88 refers to raw materials, components and not spares, while the remaining notifications refer to both components and spare parts along with consumables, raw materials etc. These notifications indicate only an exercise to cover the main goods (capital goods or machinery) and all other articles connected thereto and necessary to set up and run export oriented production units. The fact that care has been taken to furnish an exhaustive list is not sufficient to give rise to an inference that word "component part" will necessarily exclude from its scope "spare parts" also.
19. It has been urged on behalf of the department that since the subject Notifications refer to "Refractory Bricks for use as component parts of.....", that is an indication that the Bricks must be intended for use in the manufacture of furnace and not for use as spares. We have indicated that the word "component" cannot be understood in such a restricted manner. "Component" indicates that it must be an integral part. "Spare" is a component used for replacement. In other words, the word "component" indicates the nature of the article and not the user of the article while the word "spare" indicates the use to which the article is put and not the nature of the article. The nature of the spare is that it is Excise Appeal Nos.70443, 70467 & 35 70664 of 2017 a component and its use is as replacement. "Component" means an essential or integral part of the whole. Its user is in different contexts, in the initial manufacture or as spare. As already indicated, "component" is the genus and spare is a species. The word "component" without any qualifying or restrictive words must be allowed free play and must comprehend components used for initial manufacture or for replacement.
20. Reference is made to the treatment given to these words in Import-Export Policies of different years. The following definitions occur in 1992-97 Policy :-
"Component means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved. A component includes an accessory or attachment."
"Spares means a part or a sub-assembly or assembly for substitution, that is ready to replace an identical or similar part or sub-assembly or assembly. Spares include a component or an accessory."
Care has been taken to bring out that "spare" comprehends "component". The definitions in 1985-88 Policy are as follows :-
"Component means one of the parts of a sub-assembly or assembly of which a manufactured product is made up and into which it may be resolved and includes an accessory or attachment."
"Spare means a part or sub-assembly or assembly for substitution i.e. ready to replace an identical similar part or sub-assembly or assembly, if it becomes faulty or worn out, and includes an accessory (attachment) in the same regard."
The two sets of definitions are almost identical except that according to 1992-97 Policy, spare includes component. This, in our opinion is clarificatory of the correct position, Excise Appeal Nos.70443, 70467 & 36 70664 of 2017 namely, that while every spare is a component, every component may not be a spare as illustrated by the decisions in Commissioner of Sales Tax v. Amar Radio Cabinet Works - 1968 (22) STC 63 (Bom. HC), Sujan Singh and Another v. Appellate Asstt. Commissioner of Sales Tax - 1969 (24) STC 504 (Delhi HC), Bajoria Halwasiya Service Station v. The State of Uttar Pradesh and Another - 1970 (26) STC 108 (All. HC) and Televista Electronics (P) Ltd. v. Commissioner of Sales Tax - 1992 (87) STC 410 (Delhi HC). The broad definitions of component and spare given in the Policies are only a reflection of the dictionary-meaning which we have already considered as supporting the stand taken by the assessee. The inclusive definition of spare in 1992-97 Policy does not go against it.
21. In The Tata Oil Mills Co. Ltd. v. Collector of Central Excise - 1989 (43) E.L.T. 183 (SC) the provisions of Notifications 46/72 and 25/75 came up for consideration. The Notifications allowed rebate or exemption in case rice bran oil is used in the manufacture of soap. The oil has to be purified before use in the soap manufacturing process. Purification and manufacture were attended to by the assessee in two different factories. The court rejected the contention of the department that the Notifications were not attracted since the oil was not directly used in the manufacture of soap. Hydrogenated Rice bran oil did not cease to be rice bran oil. The court observed as follows :-
".....an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted....... so far as (a) is concerned, the object of the notification - even Excise Appeal Nos.70443, 70467 & 37 70664 of 2017 as the Tribunal finds - is to grant a concession to a manufacturer of soap who manufactures soap from rice bran oil to a substantial extent and thus discourage the use of edible oils in the manufacture. If these two aspects are considered together, it is clear that the emphasis in the notification is not that rice bran oil should be used as raw material in the very factory which produced the soap.
The requirement is that the soap manufacture should, to a prescribed extent, be from rice bran oil as contrasted with other types of oil. The contrast is not between the use of rice bran oil as opposed to rice bran fatty acid or hydrogenated rice bran oil, the contrast is between the use of rice bran oil as opposed to other oils. That is the ordinary meaning of the words used. These words may be construed literally but should be given their fullest amplitude and interpreted in the context of the process of soap manufacture. There are no words in the notification to restrict it to only cases where rice bran oil is directly used in the fatty acid derived from rice bran oil. The whole purpose and object of the notification is to encourage the utilisation of rice bran oil in the process of manufacture of soap in preference to various kinds of oil (mainly edible oils) used in such manufacture and this should not be defeated by an unduly narrow interpretation of the language of the notification even when it is clear that rice bran oil can be used for manufacture of soap of the only after its conversion into fatty acid or hydrogenated oil."
(Emphasis supplied)
22. We have considered the matter in the light of the guidelines formulated by the Supreme Court. The furnace, the final product is made of layers of sheets put together and inner sides are lined with Refractory Bricks of special shape or quality which could withstand high temperatures. After some time, the Refractory Bricks get damaged or Excise Appeal Nos.70443, 70467 & 38 70664 of 2017 suffer wear and tear and are no longer fit for the purpose for which they are used in the lining and require to be replaced. For a long period prior to the coming into force of Central Excise Tariff, under erstwhile T.I. 72(3), tariff rate of duty of all component parts of machinery, namely, such parts as are essential for the working of the machine and have been given for that purpose some special shape or quality was 40%. There is no dispute that erstwhile T.I. 72(3) covered spares also. With the coming into force of Central Excise Tariff Act, 1975, under sub-heading 6902.01, the prescribed rate of duty was 85%. The statement of objects and reasons of the new Act indicated intention to maintain old level of effective duty by issuing appropriate exemption notifications. It was with this object that Notification No. 242/76 was issued exempting Refractory Bricks of special shape or quality for use as component part of Industrial Furnaces falling under Heading 69.02 from so much of the portion of the duty as is in excess of 40% ad valorem. Notification No. 77/90 continued this state of affairs. There is nothing in this background or the terms of the Notifications to indicate any intention to maintain the level of duty only in regard to Refractory Bricks used in initial assembly or manufacture of Furnaces and not to maintain the level of effective rate of duty in respect of Refractory Bricks used as spares. The language used in the Notification is clear, unambiguous and of wide import. Considering the process involved and the broad object, import and language of the Notifications, the absence of any words of restriction or qualification, any restrictive interpretation will lead to frustration of the underlying object and cannot be adopted. On a reasonable interpretation, it is clear that application of the Notification is not restricted to cases of intended use in initial assembly or manufacture of Furnace and covers cases of intended use as spares also.
Excise Appeal Nos.70443, 70467 & 39 70664 of 2017
23. It is contended on behalf of the department that meaning of words used in one statute cannot be used in interpreting the words used in another statute, without reference to the subject matter or the context or the language used in the two statutes. The proposition canvassed is unexceptionable. This proposition is projected to contend that the various decisions of the Supreme Court and the High Courts which arose under Central Excise Law or Sales Tax Law cannot be adopted in this case. The decision of Supreme Court in Star Paper Mills Ltd. - 1989 (43) E.L.T. 178 (SC) dealing with an exemption Notification in relation to Central Excise duty applied only dictionary meaning of "component part" which had not been defined in the Notification. The various decisions of High Courts referred to earlier under relevant Sales Tax statutes also deal with the expression "component parts" also not defined in those statutes and the High Courts resorted to dictionary meaning or popular meaning. In the Notification under our consideration also, "component part" has not been defined and we have gone by the dictionary meaning which is also the popular or common parlance meaning and to that extent the decisions have relevance.
24. Appellant has placed reliance [on] Circular No. 8/88 dated 12-4-1988 of the Central Board of Excise and Customs issued on a representation claiming that Refractory Bricks use in Electric Arc Furnace for the manufacture of steel must be treated as input for the purpose of availing Modvat credit under Rule 57A of the Central Excise Rules, 1944. The Board indicated that Refractory Bricks "are used in Electric Arc Furnace for giving inner lining which become an integral part of Electric Arc Furnace (Machinery). Therefore the same would not be eligible for Modvat credit." A Larger Bench of the Tribunal has held that parts of machinery are not excluded from the purview of Modvat scheme. However, the view of the Board that Refractory Bricks became an integral part of Furnace supports the view Excise Appeal Nos.70443, 70467 & 40 70664 of 2017 taken by us which is that an integral part of Furnace must certainly be regarded as "component part" of Furnace"
4.10 Now coming to issue of fulfillment of the condition specified by Sl No 2 of Notification No 12/2012-CE and, Sl No 5 of Notification No 12/2012-Cus. We find that this issue is squarely covered by the decision of Ahmedabad bench in the case of Salora Components Pvt Ltd. [2019 (370) ELt 925 (T- Ahmd)] holding as follows:
"4. .......
As regard the entitlement of the exemption notification Nos. 25/1999-Cus., dated 28-2-1999 and 25/2002-Cus., dated 1-3-2002, we find that the lower authorities have denied this exemption only on the ground that the appellant have not followed the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In this regard we find that in the peculiar facts of the present case, initially when the goods were imported, the same were received in the factory of the appellant who was 100% EOU and admittedly used within the 100% EOU. The exemption is claimed only at the time of debonding of 100% EOU. The procedure provided under Customs Rules, 1996 is mainly for the purpose of movement of goods from port of Custom up to the factory and use thereof. In the present case, since the goods were imported by 100% EOU which were cleared under notification 52/2003-Cus., dated 31-3- 2003. Even as per this notification, the goods are cleared on the presentation of the exemption certificate issued by the jurisdictional officer and on that basis, the movement of goods from the port up to the factory of the appellant is done under bond. More or less the similar procedure is followed either in notification 52/2003 or under notification 25/1999-Cus. and 25/2002-Cus. Therefore, the movement of goods imported by the appellant from Custom port up to the factory as well as use thereof is completely within the monitoring of the department. Even in the case of Excise Appeal Nos.70443, 70467 &
41 70664 of 2017 procedure prescribed under Customs Rules, 1996, similar procedure is followed. Therefore, even if the procedure of Customs Rules 1996 was not followed but practically the similar procedure was followed with reference to notification 53/2003-Cus., if any lapse on the part of the appellant it is mere procedural lapse. For this reason, the substantial benefit of notification Nos. 25/1999-Cus. and 25/2002-Cus. cannot be denied. The judgments cited by the Ld. Commissioner (A) is in the facts of the case where the goods are cleared from the Customs and received by DTA unit which are not under the control of Customs/Excise department whereas the facts of the present case is different as the appellant is a 100% EOU. Therefore the judgments cited by Revenue stand distinguished. As per the above discussion, we are of the view that the appellant is entitled for exemption under notification 25/2002-Cus. and 25/1999-Cus. Accordingly, the impugned order is set aside. Appeals are allowed."
4.11 Similar Clarification has been issued by the Director General Export Promotion vide his letter issued from F.No. DGEP/EOU/450/2006 dated 09.02.2007. The relevant text is reproduced below:
"2.The matter has been examined. It is seen that parts, components and accessories of mobile handsets including cellular phones are exempted from basic customs duty, additional duty of customs under Section3 (1) and Section 3 (5) of the Customs Tariff Act,1975 under notification no.21/2005-Cus dated 01.03.2005 and 39/2005-Cus dated 02.05.2005 with a condition that the importer has to follow the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules,1996.These parts, components and accessories of mobile hand sets including cellular phones are also exempted from excise duty under notification no.
6/2006-C.E.dated0 1.03.06 as amended with a condition for Excise Appeal Nos.70443, 70467 & 42 70664 of 2017 the manufacturer to follow the procedure set out in the Central Excise (Removal of Goods at Concessional rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The DTA manufacturers of mobile phones are thus entitled to import/ indigenously procure parts, components and accessories of mobile handsets including cellular phones free of duty under the aforesaid notifications whereas EOU units are being denied the benefit of these notifications.
3. Such parts,components and accessories imported procured indigenously by an EOU are used for manufacture of mobile hand sets including cellular phones in their licensed premises under Section 58& 65 of Customs Act, 1962. It follows the provisions of Manufacture & Other Operations in Warehouse Regulations, 1966 and executes a bondB-17 binding itself in respect of endues of the imported/ indigenous goods, to maintain records of receipt, consumption and balance in stock and to pay duty on inputs in case they are not used in connection with production within a period of three years along with interest. Further, EOU follows procedure of procurement certificate/ CT-3 certificate for import/ indigenous procurement, gives information of receipt of the goods which are physically verified and warehoused by the officer-in-charge and re- warehousing certificates are issued. These are mandatory features of the EOU scheme for the uni operating under EOU notification 52/2003-Cus and 22/2003-CE. Thus an EOU following such a procedure substantially satisfies the requirements of the Rules to be followed as stipulated under the notifications 21/2005-Cus dated 01.03.2005, 39/2005-Cus dated 02.05.2005 and 6/2006-C.E. dated 01.03.2006.
4.Despite observance of the provisions of the above rules in spirit, if EOUs are denied exemption on parts, components and accessories on the ground that these notifications are not applicable to EOUs, it would put EOU manufacturers at Excise Appeal Nos.70443, 70467 & 43 70664 of 2017 a disadvantageous position vis-avis DTA manufacturers. This is not the intention behind the relevant provision of EOU notification 52/2003-Cus and 22/2003-CE. Accordingly, it is hereby clarified that exemption of customs and central excise duties on parts, components and accessories of mobile handsets including cellular phones under notification no. 21/2005-Cus dated 01.03.2005, 39/2005-Cusdated 02.05.2005 and 6/2006-C.E.dated01.03.2006 shall be applicable for EOUs, if all substantive conditions of rules required to be followed under these notifications are fulfilled by an EOU to the satisfaction of the jurisdictional Asstt./ Dy. Commissioner of Customs or Central Excise, as the case may be."
Revenue in their appeal have not disputed the above clarification but have stated that this circular would not be applicable for the reason that these items do not fall within the category of components, parts etc. However for the view taken by us we hold that thesaid clarification would be applicable and the benefit of said notification will be admissible to the appellant.
4.12 The last issue raised by the revenue in there appeal is whether respondent could have claimed the benefit of this notification subsequent to clearance of the goods. We do not find any merits in the said submission. Commissioner has in the impugned order relied upon the decision of Hon'ble Apex Court in case of Share Medical to allow the benefit of the said notification claimed by the respondent in the proceedings before him. In case of Indsolar Ltd [2019 (367) ELT 679 (T-All)] coordinate bench has held as following:
"5.19 Apart from the above, I also place reliance upon the Hon'ble Apex Court's decision in the case of Share Medical Care V/s Union of India, 2007 (209) ELT 321 (SC), wherein it was held by the Hon'ble Supreme Court that even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, not prohibited or estopped from claiming such benefit at a later Excise Appeal Nos.70443, 70467 & 44 70664 of 2017 stage. I also note that the ratio of the above Apex Court decision in Share Medical case (supra) was followed by the Hon'ble Tribunal in the case of Cipla Limited Vs Commissioner of Customs, Chennai, 2007 (218) ELT 547 (Tri.-Chennai), where in it was held that it was a settled law that the benefit of an exemption Notification can be claimed at appellate stage also following the ratio of the judgement of Share Medical case (supra). It is therefore even more clear that in the instant case, the benefit of alternative exemption notification of Notification No.12/2012- C.E. and Notification No.24/2005-Cus cannot be denied to the party, particularly in light of Board clarification dated 01.02.2017, since the said clarification allows benefits of these Notification to EOUs in addition to DTA units.
7. The Revenue's grievance in their memo of appeal is that the fact of availability of Alternate Exemption Notification No.24/2005-Cus and 12/2012-CE is not being disputed but as the appellant had not initially claimed the benefit of the said notifications and the imports were not imported under the claim of exemption in terms of the said notification, the subsequent claim is only a after though and misleading. The same is hypothetical to a state that they could have procured goods under general exemption notification whereas the fact remains that their procurement/import was specifically under Notification No.52/2003-Cus which was available only to 100% EOU.
8. We find no merits in the above contention of the Revenue. The Revenue is not disputing the fact that the import of raw material could have taken place under the cover of other two Notification No.24/2005-Cus and 12/2012-CE. The Adjudicating Authority, before extending the benefit of the said two notifications to the respondents have referred to and relied upon the various decisions of the higher courts to hold that alternative pleas raised by an assessee are required to be considered. It is Excise Appeal Nos.70443, 70467 & 45 70664 of 2017 well settled law that if the benefit of the notifications is otherwise available to a assessee, even though not claimed at a time of the import of the goods, the benefit cannot be denied. As such, we find no merits in the Revenue's appeal, the same is accordingly rejected."
4.13 The decisions sought to be relied upon by the revenue in their appeal are clearly distinguishable and hence we do not find any merits in the submission made relying on them.
4.14 Thus, we do not find any merits in the appeal filed by the revenue.
4.15 In appeal No C/70664/2017, filed by the party against the confirmation of demand for subsequent period, we find the argument in respect of admissibility of benefit of exemption under Notification No 12/2012-Cus and 12/2012-CE has not been considered. However, as we find the issue raised in the said matter is exactly identical in view of the view taken by us as above are inclined to allow the appeal in favour of the party.
5.1 The appeals filed by the revenue are dismissed and the cross objections filed by the respondent are disposed of.
5.2 Appeal No.C/70664/2017 filed by the party (Respondent No 1), is allowed.
(Order pronounced in open court on- 31 January, 2025) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp